UK treasury urged to reform taxes to stop energy production decline

That warning came from the boss of industry body Oil & Gas UK, who added that failure to introduce more favourable terms to encourage firms to invest in prospecting for future supplies, “swaths of the UK continental shelf will be pushed into terminal decline”.

Malcolm Webb’s warning, directed at Chancellor George Osborne and his Treasury number two, Danny Alexander, came after the UK enjoyed two years of record investment in such activities, with more than £27billion spent in the past two years, according to the Financial Times.

But higher operating costs, a collapse in exploration drilling, and a steep fall in the amounts of oil and gas coming out of British waters have put the viability of continued production in jeopardy.

Falling oil prices and high tax rates on profits from such research have contributed to calls for the UK government to relax the regime under which businesses in the field operate.

Mr Webb is also urging the Chancellor to reverse a decision to hike a charge imposed on profits earned from exploiting the North Sea’s resources, imposed in 2011.

He says George Osborne had promised to lift the levy – which raised £2billion for the government – if the oil price dropped to less than $75 (£47.90) a barrel.

It currently stands just above that level, at $76.50 (£48.85).

In his March budget, the Chancellor promised to “review the whole tax regime to make sure it is fit for the purpose of extracting every drop of oil we can.”